2014 (4) TMI 71 - AT - Income Tax

Deletion of Additions - Unexplained Investments - purchase of plot on account of unexplained investment Whether CIT(A) ought to have not admitted fresh evidences submitted by assessee which is against Rule 46 of Act - Held that - additional evidence was not placed by assessee before assessing officer - Hence CIT(A) ought not to have admitted fresh evidences and should have followed procedure under Rule 46A - CIT(A) observed that during appeal proceedings, ld.AR filed copies of sale deed relevant bank statement and cash book to show that payments are duly recorded in books of account and properly explained - Here again, CIT(A) has violated provisions of Rule 46A - Set aside order of CIT(A) and restore matter to file of assessing officer and thereafter decide issues in accordance with law - Decided in favour of revenue. Estimation of ncome as a percentage of turnover, after rejecting the book results disclosed by the assessee - Held that - CIT(A) has adopted the net profit rate of 8% for construction business following the consistent view taken by the Tribunal in similar cases - Decided against the revenue. Capital Gains - valuation - The owners got four flats along with appurtenant lands in lieu of sale consideration of flats which was partitioned between the co-owners. For registration purpose, the flats and appurtenants lands were valued at different rates depending upon the floors. This value has been wrongly taken as the sale value of the land transferred by the assessee to the developer by the assessing officer and the CIT(A) has rightly deleted the addition made by the assessing officer. - Decided against revenue. Exemption u/s 54F - whether the property purchased by the assessee was capable of being used as residential accommodation. - Held that - no infirmity in the view taken by the CIT(A) as to the residential nature of the property purchased by the assessees, considering the factual aspects - Mere non residential use subsequently would not render the property ineligible for benefit u/s.54F, if it is otherwise a residential property, as held by the Delhi Bench of the Tribunal in the case of Mahavir Prasad Gupta Vs JCIT 2005 (10) TMI 231 - ITAT DELHI-G . - Decided against the revenue. Undisclosed investment - search and seizure was conducted on the premises of another person - additions, on the basis of cost of construction - assessees pleaded before the CIT(A) that the construction of Punnaiah Plaza was done as per MOU wherein the amount was contributed by various individuals/owners in certain ratio. - Held that - The CIT(A) placed reliance on the third member decision of this Tribunal in the case of Rama Traders V/s, first ITO 1988 (2) TMI 142 - ITAT PATNA , wherein it was held that presumption provided in Section 132(4) is only in respect of persons from whose custody the document was seized and the presumption cannot be extended to third parties. - Decided against the revenue.

Issues Involved:
1. Unexplained investment in the purchase of plots.
2. Understatement of cost of construction.
3. Rejection of book results and estimation of income.
4. Addition on account of capital gains.
5. Deduction under Section 54F of the Income Tax Act.
6. Admission of fresh evidence under Rule 46A of the Income Tax Rules.

Detailed Analysis:

1. Unexplained Investment in the Purchase of Plots:
- Issue: The addition of Rs 4,00,000/- for the purchase of a plot in the name of the minor son, Rs 3,40,000/- for another plot, and Rs 4,00,000/- for a plot in the name of the minor daughter.
- CIT(A) Decision: Deleted the additions, stating that the investments were satisfactorily explained with evidence such as bank statements and account books.
- Appellate Tribunal Decision: Set aside the order of the CIT(A) and restored the matter to the Assessing Officer (AO) for fresh consideration as the CIT(A) admitted fresh evidence without following Rule 46A.

2. Understatement of Cost of Construction:
- Issue: Addition of Rs 15,18,341/- on account of unexplained investment in the construction of "Punnaiah Plaza."
- CIT(A) Decision: Deleted the addition, referencing a similar case where the presumption under Section 132(4) was not applicable to third parties.
- Appellate Tribunal Decision: Upheld the CIT(A)'s decision, rejecting the Revenue's grounds based on the precedent that presumption under Section 132(4) is not applicable to third parties.

3. Rejection of Book Results and Estimation of Income:
- Issue: Additions made by estimating income as a percentage of turnover after rejecting book results.
- CIT(A) Decision: Deleted the additions, stating that while rejecting book results was justified, the estimation of income at 15% was excessive. Directed the AO to rework the income at 8%.
- Appellate Tribunal Decision: Upheld the CIT(A)'s decision, stating that the 8% estimation was consistent with similar cases.

4. Addition on Account of Capital Gains:
- Issue: Addition made on account of capital gains from the sale of undivided share of land.
- CIT(A) Decision: Deleted the addition, holding that the sale value of the land was correctly determined and the value of the flat and appurtenant land for registration purposes could not be taxed as capital gains.
- Appellate Tribunal Decision: Upheld the CIT(A)'s decision, confirming that the sale value was correctly determined and the addition was not justified.

5. Deduction under Section 54F of the Income Tax Act:
- Issue: Disallowance of deduction under Section 54F for investment in a new property claimed to be residential.
- CIT(A) Decision: Allowed the deduction, stating that the property was residential based on various evidences and subsequent non-residential use did not affect the eligibility for deduction.
- Appellate Tribunal Decision: Upheld the CIT(A)'s decision, agreeing that the property was residential and the deduction under Section 54F was justified.

6. Admission of Fresh Evidence under Rule 46A:
- Issue: Admission of fresh evidence by the CIT(A) without following the procedure under Rule 46A.
- Appellate Tribunal Decision: Noted that the CIT(A) had given due opportunity to the AO to examine the evidence, thus rejecting the Revenue's grounds on this issue.

Conclusion:
- Appeal for Assessment Year 2000-01: Allowed for statistical purposes.
- Remaining Appeals: Dismissed, upholding the CIT(A)'s decisions on various grounds, including the proper explanation of investments, correct determination of capital gains, and justified deduction under Section 54F.

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